Hedge fund billionaire Steven A. Cohen is feeling the pinch from the federal government's insider trading probe as outside investors in his SAC Capital Advisors submitted a request to withdraw $1.68 billion from the firm by year's end.
The dollar value of investor redemption notices exceeds the $1 billion figure Cohen had been telling the 900 employees at his $14 billion hedge fund to expect. The firm was bracing for withdrawals as the insider trading investigation increasingly focuses on the activities of former employees of Cohen's fund.
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But the figure likely will not impede SAC Capital's operation in the near term, since those dollars will be returned over the course of year. And roughly 60 percent of the money managed by Cohen's firm is either his or his employees'.
A representative for one of Cohen's outside investors said even if all of the roughly $6 billion in outside money was withdrawn from SAC Capital, the hedge fund would still be able to operate but would likely be smaller.
An employee of SAC Capital who did not want to be identified said, "SAC could handily cover all costs for operation," in the unlikely event all the outside money was withdrawn.
A person familiar with the firm said the firm's trading profits will help offset losses from the $1.68 billion investors are redeeming.
The deadline for outside investors to put in notices was Thursday night.
SAC's biggest outside investor, Blackstone Group, is keeping most of its $550 million with the firm. The asset management arm of the private equity firm decided to stay with Cohen's firm after negotiating more flexible redemption terms on behalf of all of the firm's investors.
Right now investors who redeem in the first quarter will get their money, spread out over the four quarters of this year.
But Cohen, after negotiating with Blackstone, decided to treat investors who wait to redeem until the second quarter no differently than ones who redeem now - meaning those who redeem next quarter will also get all their money out by year's end.
Until now, Cohen's outside investors generally have stood by him as the government investigated allegations of insider trading at SAC Capital for at least six years.
One reason investors have stuck with Cohen is because he has delivered annualized average returns of about 25 percent since his firm was launched in 1992. SAC Capital's flagship fund gained 13 percent last year, when hedge funds on average only returned 6 percent.
In January, SAC Capital was up 2.5 percent, about in line with peers.
But following last November's arrest of former SAC portfolio manager Mathew Martoma, in what is alleged to be one of the most lucrative insider trading schemes on record, some investors are losing patience. That said, many investors, which include high net worth individuals and firms that manage money for small groups of wealthy families, will not say what they are doing.
(Reporting by Svea Herbst-Bayliss and Jennifer Ablan, additional reporting by Katya Wachtel; Editing by Matthew Goldstein, Lisa Von Ahn and Nick Zieminski)